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LTV to CAC Ratio Calculator

Check your unit economics in one step. The calculator works out gross-margin customer lifetime value and customer acquisition cost from your own numbers, then gives the LTV:CAC ratio, the CAC payback period and a plain-language health rating.

Last updated:

Customer value
$/ month
%

Revenue minus cost of serving the customer (hosting, support, payment fees).

%

Share of customers who cancel each month.

Acquisition
$

Total for the period: ads, salaries, tools, agencies.

customers
Enter your values to see the result.
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How to use the LTV to CAC Ratio Calculator

  1. Enter ARPU, the average monthly revenue per paying customer.
  2. Add the gross margin and monthly churn rate to turn revenue into lifetime gross profit.
  3. Enter sales & marketing spend for a period and the new customers won in that same period.
  4. Read the LTV:CAC ratio and rating, plus LTV, CAC and the payback period.
  5. Use the churn table and chart to see how retention changes the ratio.

LTV:CAC formula

  • LTV = ARPU × gross margin % ÷ monthly churn %
  • CAC = sales & marketing spend ÷ new customers acquired
  • LTV:CAC = LTV ÷ CAC
  • CAC payback (months) = CAC ÷ (ARPU × gross margin %)

Example: ARPU $120, 75% margin and 3% churn give $90 of gross profit per month for an average 33.3 months, so LTV = $3,000. Spending $45,000 to win 50 customers is a CAC of $900. The ratio is 3,000 ÷ 900 = 3.33:1 and payback is 900 ÷ 90 = 10 months.

Reading the ratio

LTV:CACMeaningTypical action
Below 1:1Losing money on every customerStop scaling spend; fix pricing, churn or channel costs
1:1 – 3:1Customers pay back with thin marginImprove retention or lower CAC before growing
3:1 – 5:1Healthy, sustainable growthKeep investing at a steady rate
Above 5:1Very efficient; possibly under-investingTest more spend to grow faster

The ratio is an average. Check it per channel and per customer segment: a blended 3:1 can hide one channel at 6:1 and another at 0.8:1.

Frequently asked questions

How do you calculate the LTV to CAC ratio?

LTV:CAC = customer lifetime value ÷ customer acquisition cost. Here LTV = ARPU × gross margin ÷ monthly churn rate, and CAC = sales and marketing spend ÷ new customers. For example $120 ARPU × 75% ÷ 3% = $3,000 LTV; $45,000 ÷ 50 customers = $900 CAC; the ratio is 3.33:1.

What is a good LTV:CAC ratio?

A ratio of about 3:1 is the most widely used benchmark for subscription businesses. Below 1:1 you lose money on each customer, 1:1 to 3:1 leaves thin margins for overhead, and well above 5:1 can mean you are under-spending on growth.

Why use gross margin in LTV?

Revenue is not profit. Hosting, support, payment processing and other costs of serving a customer come out of every payment, so a gross-margin LTV shows the money actually available to pay back acquisition costs. Using revenue LTV makes the ratio look better than it is.

What costs belong in CAC?

Fully loaded CAC includes advertising, content and events, sales and marketing salaries and commissions, agencies and the software used to acquire customers, divided by the new customers won in the same period. Using only ad spend gives a lower, "paid" CAC.

How is the CAC payback period related?

Payback = CAC ÷ (ARPU × gross margin). It counts the months of gross profit needed to recover the acquisition cost, ignoring churn. Many SaaS companies aim for 12 months or less.

Why does churn have such a big effect?

Average lifetime is 1 ÷ churn, so halving churn from 4% to 2% doubles the lifetime from 25 to 50 months and doubles LTV. The churn table shows this directly.

Is my data stored?

No. Everything is calculated in your browser and nothing is uploaded.

Are all the tools on FreeToolCabin tested for quality and accuracy?

Yes! Every tool on our site undergoes automated Q/A testing in real browser environments to ensure high precision, correct output, and zero errors. If you happen to spot a bug or have a suggestion, please contact us at [email protected] and our team will review it right away.

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